Year: 2018

ProInversión continues to drive private funding of Peruvian infrastructure

Posted on by Emily

Over the past decade or so, the Peruvian economy has provided plenty of reasons to be optimistic. Driven by huge revenues from the mining industry, the country quickly became one of the fastest-growing in Latin America. Now, under new President Martín Vizcarra, there is an expectation that further business-friendly reforms are on the way.

Peru’s investment climate is already well established, with opportunities in sectors such as energy, mining, water and sanitation, transport infrastructure, ports, roads, railways and irrigation projects. ProInversión, the country’s private investment promotion agency, has played a key role in making Peru an attractive place for investment.

Although its main office is located in Lima, ProInversión has a presence nationwide and possesses a detailed understanding of international investment issues. By encouraging private support for public infrastructure and state activities, the efficiency of government investments can be increased and execution risks can be shared. It’s for these reasons that public-private partnerships (PPP) are gaining popularity all over the world.

In addition to the wide-ranging and diversified investment portfolio offered by ProInversión, Peru offers private investors a solid macroeconomic framework that has been tested and proven to work in recent years, along with a regulatory framework aimed at fostering private investment.

Under the Peruvian constitution, foreign and local investors receive equal treatment. Peru also guarantees the free flow of capital. This openness to foreign trade has created a truly globalised economy, with preferential access to the largest markets in the world. World Finance spoke to Alberto Ñecco Tello, Executive Director at ProInversión, about the reasons why partnerships between the public and private sectors are so important, as well as some of the exciting projects that his company is working on.

A project leader
As a public agency operating under the authority of the Ministry of Economy and Finance, ProInversión is engaged in promoting a portfolio of 50 projects worth in excess of $10.8bn between now and 2020. What’s more, this figure is set to increase significantly over the following months with additional mandates in transport, energy, water and sanitation. By offering information and guidance to investors, both domestic and international, the agency ensures that public sector works have access to the funds they need. Infrastructural projects in particular are a key focus for the organisation.

With such a broad spectrum of projects currently being designed for the Peruvian market, investors are sure to find one that suits their expertise and funding level

“The most significant infrastructure projects in ProInversión’s portfolio are linked to the improvement of water and sanitation services,” Ñecco explained. “These include a $600m development to build and operate major parts of Lima’s potable waterworks, a $304m wastewater treatment system in the Lake Titicaca basin, and a $90m wastewater treatment plant in central Peru. At present, the Titicaca project is expected to be awarded at the end of 2018.”

Among its many energy projects, ProInversión is also promoting an expansion plan for the use of natural gas in the south and centre of the country – something that will require an investment of $350m. Furthermore, the agency is supporting six electricity transmission projects that will benefit northern and eastern Peru.

In the telecommunications sector, there are broadband projects in Ancash, Arequipa, Huánuco, La Libertad, Pasco and San Martín totalling $359m. In addition, the Colca and Jalaoca mining projects are already attracting the attention of world-class mining operators.

Another potential development is the iconic 1,000km Longitudinal de la Sierra highway that stretches along the Andes mountain range, which will come at an estimated cost of $464m. Further, three specialised hospitals will be built in Lima, Piura and Chimbote.

One of the most important projects to be awarded recently is the Michiquillay copper deposit project that was granted to the Southern Perú Copper Corporation in February this year. To win this project, the Southern Perú Copper Corporation did not simply bid the most – it also included a number of vital sustainability clauses in its tender. Where possible, local employees will be recruited and community projects will be supported.

“With such a broad spectrum of projects currently being designed for the Peruvian market, investors are sure to find one that suits their expertise and funding level,” Ñecco said. “What’s more, the government-backed proposals that we highlight at ProInversión promise benefits not only for funders, but also for the broader Peruvian society.”

Putting on a show
ProInversión has started a busy 2018 by designing a robust international campaign to promote the most attractive investment opportunities in Peru. All this kicked off with a bilateral meetings agenda in Mexico and a road show in Asia, which took place in May.

In recognition of the size of European markets and the role they play at the international investment level, a ProInversión delegation travelled to Zurich, Paris and London in June to hold meetings with local equity and debt investors. This included conferences to update local counterparts on the latest opportunities in energy, telecoms, sanitation and infrastructure, among other sectors in Peru.

This road show was an excellent opportunity to announce facts and figures relating to the Peruvian economy, which is one of the most stable in Latin America. Informing audiences of Peru’s robust legal frameworks, especially with regard to PPP deals, was also on the agenda.

Previous events hosted by ProInversión have proven successful: the conclusion of the agency’s Roadshow Asia 2017 in Tokyo attracted the interest of more than 80 individuals representing the continent’s most important companies. It led to bilateral meetings with important private investors. The roadshow also included stops in Seoul and Beijing.

With the long-term infrastructure gap in Peru estimated at around $160bn, the need for external investment is as pressing as ever. By meeting face to face with investors from around the world at its road show events, ProInversión can build relationships and extol the virtues of the Peruvian investment climate.

“In addition to the diversified investment portfolio offered by ProInversión, Peru offers private investors a solid macroeconomic framework”

Promoting private investment
As a developing country, Peru promises enticing returns for investors – particularly with GDP growth averaging more than five percent between 2000 and 2016. Despite this rapid growth, however, Peru remains developed enough to offer stability to investors. The principles of transparency, good governance and sustainability are well entrenched in the country. Still, even with such a favourable economic climate, prospective investors from overseas are likely to benefit from local knowledge.

At ProInversión, the management team is willing to provide advice to clients whenever necessary. To maintain the highest possible standards of support, the agency has identified four strategic pillars that are extremely important for its long and short-term work. The first of these aims to turn ProInversión into an institution renowned for its high-quality operations.

“We must strive to become a hub of excellence so we can advise the government on the structuring and preparation of PPP projects,” Ñecco explained. “To achieve this aim, it is critical that we have the best advisors in the market, as well as standard contracts that provide the market with a degree of predictability.”

The organisation’s second major focus is social and environmental management. ProInversión has identified that a key factor of efficient social and environmental management is working on sustainable projects that are beneficial to society as a whole, while remaining profitable for investors.

The third point concerns commercial strategy. By applying a structured, organised methodology to identify, attract and sort potential investors, ProInversión ensures that it only engages with private funders that have long-term, reputable aims. By continuing to participate in local and international road shows and other promotional events, the company is able to keep attracting first-rate investors who are highly committed to the Peruvian economy.

Lastly, ProInversión continues to work at the organisational level to offer high-quality working conditions and attract the best human capital to its organisation. By ensuring that it only recruits the highest-quality candidates, ProInversión is not only able to deliver on its promises to investors, it is also able to maintain high standards of social responsibility.

If the company’s ambition is to be recognised by investors and the wider population as an effective strategic ally for the development of investment in Peru, then its mission is to promote sustainable private investment with efficiency, quality and transparency. “We invite investors to take a chance on Peru,” Ñecco said. “At ProInversión, we will do everything within its power to make sure the experience of investing in PPP projects and asset-based projects is a highly positive one. Seize the opportunity now and invest in a reliable country: invest in Peru.”

New Danish minister takes hard line on country’s biggest bank

Posted on by Max Tomlin

On April 24, Denmark’s new business minister signalled he would take a hard line on allegations of money laundering, making reference to the country’s largest lender, Danske Bank, which is embroiled in a scandal stemming from one of its Eastern European branches.

Danske Bank had been under investigation by financial regulators in both Estonia and Denmark since February

In a tweet, the newly appointed business minster, Rasmus Jarlov, said: “Danske Bank’s money laundering in Estonia is a shame and a scandal. I do not yet have an overview of what options I have as a minister, but I can guarantee that I will not hold my hand over them.”

The statement provides a strong start to Jarlov’s tenure, which only began a week earlier when he was appointed by Prime Minister Lars Lokke Rasmussen to replace the outgoing Brian Mikkelsen.

The statement also puts mounting pressure on Danske Bank, Denmark’s largest bank, which had been under investigation by financial regulators in both Estonia and Denmark since February, after it was revealed that the bank may have withheld information during inspections carried out in its Estonian branch.

The investigation was sparked by news reports that the bank’s Estonian branch was being used by family members of Russian government leadership and security agencies to launder money through British companies. One member of Danske Bank’s board, Lars Mørch, who was responsible for the bank’s business banking as well as its Baltic operations, stepped down in April as a result of the scandal.

Denmark’s own Financial Supervisory Authority reprimanded Danske Bank in May, saying it had been shown to have serious deficiencies in its governance, that its anti-money laundering controls were weak and that it had acted too late on the suspicion of criminal activity of customers. Due to the resulting damage to the bank’s reputation, it was given until the end of June to increase its capital requirement by DKK 5bn ($781.6m) as a financial buffer.

Saudi Arabia’s shining beacons of prosperity

Posted on by Max Tomlin

Former US senator Daniel Patrick Moynihan is quoted as saying that if you want to build a great city, you should create a great university and wait 200 years. Saudi Arabia is taking a different approach.

The kingdom is in the process of building five ‘economic cities’ (ECs), designed as engines to steer Saudi Arabia away from oil dependency. The first of these, King Abdullah Economic City (KAEC), broke ground in 2006. The most recent, a gargantuan project called NEOM, was announced at the end of last year. Unlike typical cities that grow organically, these cities are purpose-built with an end goal in mind, and are developed through complex public/private partnerships.

The process of getting a business licence in the kingdom is notoriously complex, with red tape, bureaucracy and corruption paralysing entrepreneurship

Though the Saudi Government has put resources towards the development of the ECs, each city is mostly privately funded through its own consortium of companies, spearheaded by one ‘master developer’. KAEC, the flagship city, has received more funding than the other ECs, while NEOM is the only city that will be wholly owned by the Saudi Public Investment Fund. The difference between the ECs and normal cities is perhaps best demonstrated by the fact that KAEC will be run by a CEO instead of a mayor, and is the first ever publicly traded city.

The cities are meant to carve out regulatory, economic and cultural oases within the kingdom where the economy and, more importantly, the private sector would flourish. They are being built from nothing, with each centred on specific industrial clusters that will serve as growth engines. These are immensely ambitious projects that, in effect, look to force economic growth.

The cities’ progress, however, has not materialised as originally envisioned. Doubts remain over the government’s ability to hit its targets and the nature of the cities’ day-to-day operations once completed.

Running out of time
Saudi Arabia finds itself at a crucial moment in its history. Commercial quantities of oil were discovered five years after the kingdom’s founding and have been the source of its economic and political power ever since. It has become increasingly apparent, however, that this will not be the case forever.

There has been scepticism about the actual size of the oil reserves, and speculation about how much time is left before they run out. Some estimates say Saudi oil fields have as little as 70 years before running dry. This has injected a sense of urgency into the country’s need to find alternative economic drivers.

“This is the million-dollar question… Can these [cities] fund and build themselves into significance fast enough? Saudis are feeling a lot of pressure. They don’t have time,” Sarah Moser, director of the urban studies programme at McGill University, told World Finance. “Oil’s going to run out in my lifetime, and [Saudi Arabia] will be a net oil importer in my lifetime. They’re only building these cities because they’re terrified. They know under the surface that things have to change very fast.”

The black fountain of wealth that has single-handedly kept the kingdom somewhere in or around the upper quartile of the world’s GDPs has come at the expense of the rest of the economy. Historically, there has been no need to devote significant resources to developing the private sector when the government could enjoy the fruits of the world’s largest oil-exporting operation. There has been little incentive to bring women – half the nation’s brainpower – into the economy when political leaders could just as easily cater to conservative religious support while falling back on oil revenues.

In the final quarter of 2014, oil prices began to collapse due to a global production glut. The result for Saudi Arabia, which depends on oil income for around 70 percent of its budget, was the biggest deficit in the country’s history. This further highlighted the risk of depending on one commodity as an economic buttress, and was a driving force behind Vision 2030 – the government’s long-term plan to diversify the kingdom’s economy, announced by Crown Prince Mohammed bin Salman back in 2016.

Weak private sector
A major roadblock to the success of the ECs is low Saudi participation in the country’s private sector. Saudis have been reluctant to enter the private sector for a variety of reasons, including significantly lower pay and working standards compared with those of the public sector. This has resulted in a skills gap that will be difficult to close in the short to medium term, as only a minority of Saudi nationals have experience working in the kind of competitive ecosystem the ECs want to foster.

The entrance of King Abdullah Economic City
The entrance of King Abdullah Economic City, Jeddah

Estimates suggest that the kingdom’s population will grow by around 20 percent by 2030, but Saudi Arabia’s current economic model, in which the state provides the majority of jobs for Saudi nationals, is unsustainable in the face of that growth. Ultimately, the kingdom needs to develop a private sector that is vibrant and attractive enough to draw in Saudi labour.

That said, Saudi Arabia ranked 92nd on the World Bank’s 2018 Ease of Doing Business Index, a far cry from the fertile investment ground it aspires to be. The process of getting a business licence in the kingdom is notoriously complex, with red tape, bureaucracy and corruption paralysing entrepreneurship. Despite steps taken in recent years to improve business conditions, such as streamlining the business registration process, strengthening protection for minority investors and putting systems in place to better enforce contracts, the kingdom still falls short.

Delays and bottlenecks
There are numerous challenges in bringing the ECs to completion by their target dates. Global economic slowdowns could stem the flow of private investment, and dips in the price of oil can harm Saudi state investment funds’ ability to provide capital. This is what happened in 2014, when the drop in oil prices saw a 77 percent decrease in the value of construction contracts awarded in the kingdom compared with 2013. In the past, contractors have also found it difficult to source labour and materials, thereby reducing their operational capacity. These delays can in turn discourage investment due to unclear returns.

In addition, the original targets for the cities were overly optimistic and demand from businesses and residents was overestimated, according to industry experts. The types of residents the cities targeted – namely, affluent Saudi nationals – have been discouraged from moving to some of the ECs because of their geographic separation from other major urban areas. Additionally, the initial emphasis for some cities was on developing the residential areas, meaning it has taken a significant amount of time for industrial and commercial entities to set up shop.

In the case of KAEC, its plan to create one million jobs will be entirely dependent on the propensity of businesses to invest and operate in the city, but it has not seen the volume of investment required. “It seems that [businesses] are interested to some extent. A lot of companies have purchased land, but there’s this perpetual [chicken-and-egg] situation where, even if a company is interested, they often buy the land and sign a memo and then they’ll just wait,” explained Moser.

She gave the example of FedEx, which bought land in KAEC but has yet to set up business in the city, citing the lack of a critical mass of customers. This in turn has had a knock-on effect on other businesses that are hesitant to set up shop in KAEC in the absence of the service FedEx provides, creating a cycle of businesses waiting for each other to enter the fray.

“If you talk to the CEO of the new city and the management, I think they will tell you that everything is going fine and they are on track, but they’re not meeting the population targets and they’re not meeting the level of investment they had sought. They are behind
schedule,” said Moser.

Problems despite success
Once completed and fully operational, there may still be problems that set the ECs apart from regular cities. The fact that the owners of the cities may not necessarily live there and may have interests that diverge from those of the residents could be a major source of tension. The cities will also cater to middle and upper-class residents, leaving the potential for sharp economic stratification within the cities, let alone between the cities and the rest of the country.

There is unequivocal potential in these megaprojects to generate wealth in ways not possible in the wider kingdom

Moreover, the ECs differ from regular cities in that they are built with productive citizens in mind – residents who can actively contribute to the economy. “One has to wonder, if you become disabled or you retire, what happens if you’re not a productive citizen anymore. Will they kick you out? It’s really unclear what’s going to happen, and it’s going to take several decades to figure out,” said Moser.

Unlike most other countries, which derive the bulk of their government revenue from taxes, Saudi Arabia does not impose income taxes on its population and only extracts modest business taxes, opting instead to fill its coffers with oil-derived wealth. To break from oil in any significant way, the government will have to begin taxing its people directly – a move likely to cause backlash among its citizenry.

That being said, there is unequivocal potential in these megaprojects to generate wealth in ways not possible in the wider kingdom. What’s more, the ECs operate under a different legal system from the rest of Saudi Arabia, and many of the legal and social norms in the kingdom are not enforced within the borders of the cities. Within KAEC, for instance, there is no gender segregation and women are not forced to wear abaya, the long black robes that are a requirement in the rest of the country. Religious and Saudi police are not permitted to enter the city, which is instead patrolled exclusively by private security. As such, the cities have the potential to catalyse change throughout the country as people are given the chance to experience a different way of life.

It is difficult to imagine, however, how Saudi Arabia will justify not recreating the cities’ economic model in the rest of the country if they are successful. “I think that [building the cities] is a cynical move, in a way, by the Saudi elite, because it’s sort of an acknowledgment that their existing cities are in a state of paralysis and it will be difficult or impossible to change them,” said Moser.

The type of diversified and prosperous economy Saudi Arabia strives for may be fundamentally incompatible with the country’s political system. The cities are trying to create a culture and an environment that mimics that of western economic hubs, but the results – even if successful – are unlikely to be adopted across the kingdom, as the prerequisite concession of control would likely pose a threat too large to bear.

Top 10 of the greatest leaders from ancient history

Posted on by Ashton Wenborn

Throughout history, there have been hundreds of well known and effective leaders. However, perhaps the most able ones can be found not from examining modern history, but by looking back into the throws of ancient times.

Alexander the Great
Alexander’s prowess in strategic warfare led to him being remembered as one of the finest military leaders of all time. He founded over 70 cities during his 13-year reign over Persia, Asia Minor and Macedonia. Inspiring bravery and loyalty in his troops, he adopted many foreign customs and traditions in order to rule his millions of subjects. Alexander was aged only 32 when he died of a fever in Babylon in June 323 BC.

Genghis Khan
Genghis Khan is most famed for his wildly destructive tendencies against his enemies, but he was also a great military leader. Khan was the founder of the Mongol Empire, the largest land-based empire the world has ever seen. Given the size of his army, the levels of discipline and training he instilled were incredible. His ability to discipline, as well as the wroth that could be incurred if he was betrayed, led to him being an extremely effective leader.

Raised by his father, [Hannibal] was made to hate Rome from a young age and was constantly engaged in battle against it during his adult life

Boudicca
Boudicca, Boadicea or Boudica was the wife of the leader of the Celtic Iceni tribe, Prasutagus. She famously won a battle against the Roman Ninth Legion after they tried to take over the tribe upon her husband’s death. She then went on to sack several cities in Roman Britain, before being defeated by the Roman army led by Paulinus in AD 60.

Mark Antony
Known as a Roman politician and the lover of the Egyptian queen, Cleopatra, Mark Antony was a great leader because of his ability to craft rousing speeches. He could rally the citizens of Rome and beyond with his oratory skills, and used both logic and emotion in order to influence the people. He most famously turned the tide of popularity against the men who had assassinated Julius Caesar, whose administrative team he was on and to whom he was related.

Cleopatra
Cleopatra VII was the ruler of Egypt from 51BC – 30BC and is famed for her independence. In a world where men ruled, she exerted impressive influence and control over Egypt. She was the only member of her dynasty – one that ruled Egypt for considerable time – to learn the difficult language of Egyptian and was, thus, able to interact with her subjects on a much deeper level than any of her ancestors had been able to.

Alaric the Visigoth
Alaric was king of the Visigoths (the western branches of the nomadic Germanic tribes) from 394-410 AD. He marched on Rome and sacked the city for three days, the first time in almost 800 years that Rome had fallen to a foreign power. As St Jerome, who was living in Bethlehem at the time, put it “The city which had taken the whole world was itself taken.”

Cyrus the Great
Perhaps less celebrated than the others, Cyrus the Great was the founder of the Achaemenid Empire, centred on Persia. The Persians he ruled as a wise and capable leader applauded him, and this legacy continued on in his death as Xenophon (Greek philosopher and student of Socrates) chose Cyrus to name as a model leader in his Cyropaedia. It is said that he was a father figure to his subjects, and his appearance in the Bible as the liberator of the Jews that were held captive in Babylonia, shows his reputation as a generous and ideal monarch.

Augustus
Augustus (originally known as Gaius Octavius) is accredited with founding the Roman Empire and was the first Emperor. He was known as a great military strategist, after defeating his rivals Mark Antony and Marcus Lepidus to take complete control over Rome and its Empire. He was also a shrewd politician and helped to transform Rome into the great city it became through the next centuries. As the biographer Suetonius reported him saying, “I found a Rome of bricks; I leave to you one of marble.”

Hannibal
Hannibal Barca was a military leader who won many victories over the Romans. Raised by his father, he was made to hate Rome from a young age and was constantly engaged in battle against it during his adult life. Said to have slept with his men out in the open and to have gone hungry with them when supplies were low, his troops placed their utmost trust in him. As a result, they followed his orders unconditionally until his assassination in 221 BC.

Tutankhamen
Although Tutankhamen was only around eighteen or nineteen at the time of his death, his status as a great leader was gained through the achievements he made over his nine-year reign. King Tut’s main success was reinstalling the traditional Egyptian polytheistic religion upon his ascension, after his father had promoted the worship of only the Sun God Aten, and banned worship of any other gods. This new religion was very unpopular within Egypt, and Tutankhamen’s decision to reverse it made him a widely acclaimed leader.

PASHA Bank continues to set the corporate standard in Azerbaijan

Posted on by Max Tomlin

In 2017, PASHA Bank remained focused on delivering high-quality services to its corporate clients in large, commercial and SME segments. In addition to improving customer support through effective relationship management and tailored packages, we also introduced many new products and services. These include Tajir Card and Tajir-Pos, which allow customers to benefit from special cash limits, while also giving them the opportunity to make swift, tax-inclusive payments.

PASHA Bank has a strong, disciplined risk management culture, where the management of risk is a responsibility shared by all employees

This wasn’t the only area of focus. To simplify customs payments and create further opportunities for our partners, PASHA Bank equipped local customs offices with modern POS terminals; the bank also issued customs cards to expedite the customs process. Meanwhile, for the first time in the history of Azerbaijan’s banking system, a local bank – PASHA Bank – acted as a lead arranger in re-financing customer loans to the sum of $13.5m. This in turn attracted both local and regional financial institutions as the remaining participants of the syndication project.

Additionally, and also for the first time in the local market, the bank successfully launched a B2B solution for our clients in the large corporate sector, including Azercell, SOCAR and Coca-Cola. This host-to-host solution provides a secure, automated exchange of payment files and reconciliation data between business customers and PASHA Bank within a single interface. It also supports the processing of various payment transaction types.

The personal touch
As a corporate bank, PASHA Bank stands out for its personalised approach to serving individual customers. Given the changes afoot in the industry, this approach includes developing a digital banking system in order to improve efficiency and minimise the need for customers to have to visit a physical branch. Our focus on customer satisfaction also involves automating individual banking processes, increasing non-cash payments of salary cards, creating new products and improving existing ones.

For instance, PASHA Bank became the first bank in Azerbaijan to issue ASAN Imza, or ‘easy signature’, a service that enables customers to use their smartphone as a form of secure electronic identification. The bank has also launched a new generation of ATMs, a MasterCard loyalty platform and a PASHA Bank discount platform. These developments are key as internet banking usage maintains an upward trajectory: by the end of 2017, 86 percent of transactions in Azerbaijan were made through online banking. What’s more, the turnover of customer operations on the PASHA Bank mobile app increased 16-fold.

Preparation is key
Even during turbulent economic times, the bank has remained financially strong and sustainable. This can be attributed to our vision of conducting business: we always prepare for both favourable and unfavourable scenarios, and we ensure our clients do the same.

Essentially, effective risk management is fundamental to the success of PASHA Bank, and is recognised as one of the bank’s strategic priorities. PASHA Bank has a strong, disciplined risk management culture, where the management of risk is a responsibility shared by all employees.

During fiscal year 2017, the risk team significantly strengthened the bank’s risk-based approach. Key projects included conducting detailed industry research for better portfolio management decisions and implementing industry limits. The bank also built its own econometric models, including a credit rating model.

Last year was also pivotal for other reasons. Throughout 2017, the quality of our customer service increased significantly. This was the result of continuous optimisation of service-point processes, as well as the introduction of new, innovative tools.

For example, the Oracle FLEXCUBE financial platform was introduced. This system is used at most of the A-class banks around the world to manage evolving customer expectations in a more satisfactory way. This new system has allowed PASHA Bank to design a brand new online banking system with better-equipped and more customer-centric online banking tools and services.

A truly global operation
In 2017, PASHA Bank continued to build and maintain its correspondent banking network: thanks to the diversified businesses of its customers, PASHA Bank expanded its partnerships to new regions and businesses. The bank also activated its treasury/investment business in the UK, developed and intensified its cooperation with new and existing European partners, and forged new partnerships in Africa, the Middle East, the Commonwealth of Independent States (CIS), and East Asia. PASHA Bank continuously builds upon its relationship with export-credit agencies in Europe and North America, while also expanding its Relationship Management Application network globally.

Last year was especially significant for PASHA Bank as it was the final year of a momentous strategic period. The bank focused on fulfilling its tactical aspirations by delivering key projects and initiatives. It has also established new horizons for its corporate and retail businesses, while targeting new volumes of credit and transactional business.

Now that the last strategic programme has come to a close, a new one is in place for the period of 2018 to 2020. This strategy focuses on business growth, strengthening the bank’s competitive position and digital initiatives. It also covers all aspects of where we should stand as a company by the end of our next three-year journey. Some main initiatives are to develop advanced digital channels, transition to a lean, agile IT system, and apply automation to increase operational efficiency. We also plan to grow in CIS via intensifying sales and enhancing product offerings, while also growing our SME customer base through a ‘go to market’ operating model.

World Finance Forex Awards 2018

Posted on by Max Tomlin

In the past two years, foreign exchange traders have been shaken from a multiyear lull in the forex market. From the second half of 2016, a series of shocks to the global economy spurred a period of significant volatility and uncertainty. And while uncertainty may spell disaster for a number of industries, it happens to be the sweet spot for the $5trn-a-day forex industry, as choppy markets allow eagle-eyed traders to turn a profit on big market movements.

The question remains whether the trends supporting the forex industry will continue, however. At the end of 2017, Dutch banking giant ING warned that “stiffer headwinds” would push against the sector in 2019 after traders grabbed at opportunities for profits in 2017 and enjoyed a “happy hour” in 2018.

The pound has staged a steady recovery against the US dollar since the UK’s vote to leave the European Union

As the industry changes in the coming months and years, only the best in the forex sector will continue to spot the most profitable prospects. The World Finance Forex Awards 2018 has identified the industry leaders poised to
make it to the top.

Swings and roundabouts
Volatility in the foreign exchange market crept higher throughout 2016 and 2017, propelled away from a period of relative stability by geopolitical shocks such as the Brexit vote in June 2016 and the election of Donald Trump as US president just five months later. Currency trades remained lively as a number of other key European elections played out.

By the end of 2018’s first quarter, Bank of America Merrill Lynch said forex activity had “awoken” after a period of hibernation, and Reuters reported forex trading volumes in the first quarter of this year rocketed to a record high at CLS, a major settler of trades.

Despite this strong start to the year, the currency market is beginning to calm down, shrugging off everything from Trump’s latest Twitter tirade to a possible trade war between the US and China. Price swings have narrowed, especially in the largest currencies. Even the Trump administration’s punitive sanctions against Russia – which sent the Kremlin’s currency, the rouble, tumbling and ramped up volatility in equities and other asset classes – did not significantly increase volatility in key currency pairs, such as the US dollar and the euro.

The dollar remains a key area of interest, however, having struggled last year after an optimistic ‘Trump bump’ quickly turned into a slump of disappointment when the US president failed to deliver on key plans. Factors including the Federal Reserve’s interest rate hikes and anxiety surrounding recent tax reform held the US dollar back from a potentially strong year as the US economy expanded in 2017. While the dollar enjoyed a moment in the sun in April and May, fully erasing its 2018 losses, a Bloomberg report said bearish bets on the currency still remain, making it one of the most crowded trades in financial markets.

Currency markets were also looking calmer in the UK, where the pound has staged a steady recovery against the US dollar since the shock vote to leave the European Union sent it tumbling in 2016. While a report by Bannockburn Global Forex said there was very little optimism surrounding the Brexit negotiations, markets were kind to sterling in 2017, so the currency avoided the collapse in demand some feared. However, with the UK’s March 2019 exit drawing closer and economic forecasts looking bleak, more volatility could be on the cards.

Technological step change
Artificial intelligence (AI) has turned one sector after another on its head in recent years as the robot revolution gets underway; foreign exchange markets are no exception. Machine learning tools are constantly being developed, with trading algorithms that can beat humans at their own game producing results quickly and more efficiently than even the best trader.

To prove the point, Japanese publishing company Nikkei this year put a robot head-to-head with the experts in its quarterly dollar-yen derby, in which readers and analysts try to predict a future exchange rate of the two currencies. AI entered the race for the first time ever, and its debut did not disappoint: Nikkei’s AI tool provided the most accurate forecast for the year-end exchange rate, beating around 400 readers and 10 analysts by sifting through a database of Nikkei articles and dozens of economic and financial indicators.

However, while the test proved that machines can produce the best results when the market is relatively calm, developers said humans remained superior in predicting forex movements when major disasters or geopolitical events were involved.

Not all organisations are taking advantage of burgeoning technologies, though. Deloitte’s 2016 report on the forex sector found 62 percent of corporates still relied on manual forecasting processes.

Another technological tool making a strong showing this year is blockchain. Distributed ledger technology has been touted as the answer to cheaper, faster and more transparent forex trades. The technology, which is best known for propping up cryptocurrencies such as bitcoin, is behind a new initiative by Santander to provide a cross-border payments system that will help the bank take on fintech specialists.

Bitcoin also stole headlines last year, as the biggest cryptocurrency by market capitalisation rocketed from a valuation of less than $1,000 at the beginning of the year to nearly $20,000 by December 2017. It was boosted by mainstream acceptance in the form of the new bitcoin futures and trading options from CME Group.

The notoriously volatile digital currency has since fallen back down to around $9,000, and many questions remain about what regulatory action will be taken against cryptocurrencies. However, some forex platforms have taken advantage of the crypto-craze by accepting bitcoin trading.

A new regulatory standard
European regulators tightened their grip around the forex industry at the start of the year with the implementation of MiFID II. The new rules require industry players big and small to provide clients with greater transparency.
The expansion of MiFID rules, which on first introduction in 2007 focused solely on equity markets, overhauled the trading landscape for all asset classes, including equities, fixed income, exchange-traded funds and foreign exchange. MiFID II has brought about a new level of transparency by requiring institutions to report more information about trades, such as price and volume.

On the other side of the Atlantic, Trump is planning to deregulate financial markets by rewriting the Dodd-Frank Act – banking rules that were imposed in 2010 following the global financial crisis. The Trump administration is planning to ease oversight of small and mid-sized banks, many of which were forced to close when they were unable to maintain new minimum capital levels. As the bill makes its way through the legislative process and signals point to the easing of capital requirements, small brokers are eyeing up the US again.

It’s a time of change for the world’s largest market in terms of trading volume, with traders monitoring ebbs and flows in volatility while grappling with a technological revolution and sweeping changes to regulatory standards. The panel of experts for the World Finance Forex Awards 2018 has identified the market leaders who are driving profits while managing the changing environment.

World Finance Forex Awards 2018

Best FX Broker, Asia
FXTM 

Best FX Broker, Europe
XM

Best FX Broker, Middle East
HYCM 

Best FX Broker, North America
Forex.com (Gain Capital)

Best ECN Broker
Fullerton Markets International

Best Cryptocurrency Broker
Fondex

Best Customer Service
Infinox

Best STP Broker
Fullerton Markets International

Best Mobile Trading App
24option

Best Trade Execution
Fondex

Best Trading Conditions
FXTM

Most Transparent Broker
Currency UK

Best Trading Platform
ADS Securities

World Finance Pension Fund Awards 2018

Posted on by Max Tomlin

As with the rest of the financial services industry, pension funds are responding to an array of challenges, including keeping up with the rising tide of technological advances and managing a dramatic shift in global demographics. However, last year the value of retirement savings soared to record heights.

Assets managed in institutional pension funds across 22 major markets reached $41.3trn at the end of 2017, up 13 percent on the previous year, according to investment consultant Willis Towers Watson. Last year’s $4.8trn increase in the total value of pension assets was the largest annual increase in dollar terms in two decades.

The number of retirees requiring state and private pensions continues to skyrocket, resulting in fewer working-age citizens for every older person

Measured as a percentage of GDP, pension assets varied between countries; the highest proportion was found in the Netherlands, where retirement fund assets rose from 126 percent of GDP in 2007 to 194 percent of GDP last year. Assets in Australia, Switzerland, the US and Canada all rose, but not every nation was so lucky. In Japan, a rapidly ageing population led to a rise in retirement benefit payments and a drop in pension fund assets, from 66 percent of GDP in 2007 to 63 percent last year.

The World Finance Pension Fund Awards 2018 celebrate the industry’s best and brightest, and those firms that have demonstrated an ability to innovate and adapt, all while maintaining a standard of excellence.

Demographic crunch
Japan is not the only country grappling with a demographic crisis. In virtually every nation in the world, the number and proportion of older people in the population is growing, according to the UN. The issue is set to become one of the most significant social transformations of the 21st century, the organisation said.

Advances in medicine, nutrition and sanitation have boosted life expectancies in 2018 to highs of 84 years in some countries. This paired with falling birth rates has caused the proportion of pensioners in societies around the world to swell.

The number of people aged 60 and over is expected to more than double by 2050 and to triple by 2100, outpacing growth in all younger age groups. According to the UN’s 2017 data, the number of people aged 60 and over is set to rise from 962 million globally in 2017 to 2.1 billion in 2050, and finally to 3.1 billion by the next century. Meanwhile, the number of people aged 80 and over is set to triple by 2050 compared with 2017.

The Organisation for Economic Cooperation and Development (OECD) said in a report last year that in the future people will have to postpone their age of retirement to ensure a decent pension, as the pace of public spending on pensions for the OECD as a whole is expected to slow substantially. Under legislation currently in place, by 2060, the normal retirement age will increase in about half of OECD countries, by 1.5 years for men and 2.1 years for women on average, reaching just under 66 years. In addition, expected advances in longevity mean the time people spend in retirement will also increase.

As the number of retirees requiring state and private pensions continues to skyrocket, resulting in fewer working-age citizens for every older person, the global pensions system is coming under immense pressure. Governments around the world are challenged with ensuring pensions remain financially sustainable and workable through the transformation.

Technological breakthrough
In its annual report, Willis Towers Watson said the uptake of new technologies in the pensions industry has been “surprisingly light” so far, as evidenced by legacy systems that rely heavily on spreadsheets. The prioritisation of technological innovation has not changed much over the past 20 years, the firm said, but it picked tech as one of the key trends to watch over the next five to 10 years, suggesting a breakthrough is in the industry’s near future.

“Technology will challenge business models and human capital, requiring adaptation. The ‘people plus technology’ model should ultimately emerge as dominant,” said the Willis Towers Watson report.

One way pension funds have already embraced tech is through the rise of robo-advisors. These services provide customers with a more effective and less costly alternative to a human advisor by programming artificial intelligence systems to guide retirees through the pensions system. A report by consulting firm Mercer said robo-advisors have gathered around $225bn in assets under management as of 2017 due to a strong uptake in the wealth advisory industry. That figure is set to rise to more than $1trn by 2021.

Mercer also hinted that blockchain could come into the picture for pension funds, as more and more administrative tasks are being automated. Blockchain technology could remove the need for third-party intermediation and, Mercer said, smart contracts could be established so that when a member reaches retirement age, the smart contract automatically releases
the member’s pension.

Accountancy giant KPMG has also thrown its weight behind blockchain technology, saying it could provide a more reliable and easier-to-use database compared with current administration systems, creating a “true financial passport”.

But according to a report in The Times, pension funds still need to invest more in fintech in order to engage savers and help them understand their investments. Workplace pensions in the UK started adopting cloud-based platforms in the run-up to the February 2018 deadline for compulsory pension auto-enrolment. Three quarters of employers said they use a cloud-based platform or off-site hosted software. The industry is now looking to adopt more advanced technology to improve income modelling and encourage staff to increase contributions, the report said.

Refocusing the models
Pension fund trustees are starting to understand that incorporating environmental, social and governance (ESG) considerations into their standard investment processes is part of their fiduciary duty, HSBC said in a report last year. The lender noted: “Historically, fiduciary duty was viewed as being applicable only to the financial interests of the funds’ current beneficiaries, rather than those of future generations. This is now changing, with a growing recognition among regulators, law courts, institutional investors and individual scheme members that the interests of future beneficiaries are as relevant to the governance of pension funds as those of current members.”

Willis Towers Watson listed sustainability and long-horizon investing as one of its key issues for pension funds to consider over the next decade. “Opportunities are being missed in the overlapping areas of sustainability, ESG, stewardship and long-horizon investing. Investors need to combine both investment beliefs and wider sustainability motives in their strategy,” it said.

The consultancy said another area where traditional ways of thinking must change was culture. It said firms should shift from a model of “male, ethnocentric, economics-educated with limited culture” to “multidisciplinary, diverse spectrum of backgrounds with stronger culture”, saying investment organisations increasingly differentiate themselves by referencing
their values or culture.

Another area to watch is governance. “The governance of pension funds has been a growing source of attention fanned by successive industry reviews,” Willis Towers Watson said, though it noted pensions governance is a lot stronger than it was 20 years ago. Despite this, there is a “big governance challenge” to build the resources required to manage a complex organisation.

With this myriad of challenges come winners and losers. The World Finance Pension Fund Awards 2018 identify the companies to watch by highlighting those that are setting higher standards in the pensions industry around the world.

World Finance Pension Fund Awards 2018

AUSTRALIA
Asgard

AUSTRIA
APK

BELGIUM
KBC

BOLIVIA
BISA Seguros y Reaseguros

BRAZIL
Itaú Unibanco

CANADA
RBC

CARIBBEAN
NCB Insurance

CHILE
AFP Capital

COLOMBIA
Banco GNB Sudameris

CZECH REPUBLIC
KB Pension Company

DENMARK
Danica Pension

ESTONIA
Nordea Pensions Estonia

FINLAND
Elo

GERMANY
Allianz

GHANA
Pensions Alliance Trust

GREECE
Alpha Trust

ICELAND
Arion banki

IRELAND
Allianz

ITALY
Fonchim

JAPAN
Government Pension Investment Fund

MACEDONIA
KB First Pension Company

MALAYSIA
Gibraltar BSN

MEXICO
Afore XXI Banorte

MOZAMBIQUE
Moçambique Previdente

NETHERLANDS
Zwitserleven

NIGERIA
Fidelity Pension Managers

NORWAY
Nordea

PERU
Prima AFP

POLAND
ING

PORTUGAL
Banco Santander Totta

SERBIA
Dunav

SOUTH KOREA
KEB Hana Bank

SPAIN
Ibercaja Pension

SWEDEN
Alecta

SWITZERLAND
Zurich

THAILAND
Kasikorn Asset Management

TURKEY
AK Asset Management

UK
Pension Protection Fund

US
Arkansas Teacher Retirement System

Banking Awards 2018

Posted on by itsupport

The past decade has seen the banking sector make moves towards a stable future following a long period of significant upheaval caused by the financial crisis. What beckons is a new era with the focus now on sustainability and technological reinvention in order to keep up with the pace of change within the sector.

Banking Guide 2018

The landscape is markedly different from that of 2008. Regulatory reform has been key in redefining the operating environment and the success stories have been for those willing to treat this new regulatory system as an opportunity to stand out from the crowd.

The restoration of trust has reawakened confidence in the sector and the outlook now is perhaps one of cautious optimism.

However, the sector is still weathering the winds of change. Technology-focused start-ups have proven themselves significant disruptors in the market by providing innovative alternatives to the services traditionally offered by banks.

Perhaps more significantly, cryptocurrencies have contested the fundamental concept of money, becoming a legitimate asset in a tremendously short space of time. Banks have been forced to re-think how they operate today so that they are prepared for a future that includes working with new systems and new technologies.

Through steady strategic investment and acquisition banks are now re-evaluating the future role that they will play in the economy by turning enemies into allies.

The great technology roll-out is thanks in part to the gradual development of open banking as the new standard. Application programming interfaces (APIs) will make it possible for banks to offer certain tools and data packages to third parties, and these will define the relationships banks develop in 2018 and beyond.

The 2018 World Finance Banking Awards have sought to identify the banks that have successfully held their nerve during a period of uncertainty and are now preparing tools to last them for the foreseeable future and beyond. Congratulations to all of our winners.

 

World Finance Banking Awards 2018

Best Banking Groups

Azerbaijan PASHA Bank
Brunei Baiduri Bank
Dominican Republic Banreservas
France Crédit Mutuel
Bolivia Banco Mercantil Santa Cruz
Cyprus Eurobank
Egypt AAIB
Ghana Zenith Bank (Ghana)
Jordan Jordan Islamic Bank
Lebanon Bankmed
Malaysia Maybank
South Korea Woori Bank
Kenya Kenya Commercial Bank
Macau ICBC (Macau)
Nigeria Guaranty Trust Bank
Turkey Akbank

Best Investment Banks

Bahrain SICO
Brazil BTG Pactual
Canada RBC
Chile BTG Pactual
Colombia BTG Pactual
Dominican Republic Banreservas
France BNP Paribas CIB
Germany Deutsche Bank
Italy Mediobanca
Jordan Arab Bank
Kuwait Boubyan Bank
Nigeria Coronation Merchant Bank
Oman Bank Muscat
Qatar Qatar National Bank
RussiaVTB Capital
Saudi Arabia SaudiMed
Turkey Akbank
UAE First Abu Dhabi Bank
Vietnam MB Securities

Best Private Banks

Austria Bankhaus Spängler
Bahrain Ahli United Bank
Belgium BNP Paribas Fortis
Canada BMO Private Banking
Chile Inversiones Security
Czech Republic Česká Spořitelna
France BNP Paribas Banque Privée
Greece Eurobank
Italy BNL-BNP Paribas
Liechtenstein Kaiser Partner
Monaco CMB
Nigeria First Bank of Nigeria
Peru BBVA Continental
Sweden SEB
UAE First Abu Dhabi Bank

Best Commercial Banks

Azerbaijan PASHA Bank
Belgium BNP Paribas Fortis
Dominican Republic Banreservas
Hungary ING
Bahrain Ahli United Bank
Canada BMO Bank of Montreal
Germany Commerzbank
Italy BNL Gruppo BNP Paribas
Kuwait National Bank of Kuwait
Myanmar KBZ
Portugal ActivoBank
Sri Lanka Sampath Bank
Macau Banco Nacional Ultramarino
Nigeria Zenith Bank
Saudi Arabia Alawwal Bank
US Bank of the West
Vietnam SCB

Best Retail Banks

Angola Banco de Fomento
Egypt Commercial International Bank
Lebanon Bankmed
Bulgaria Postbank
Dominican Republic Banreservas
Greece Eurobank
Malaysia Maybank
Netherlands ABN AMRO
Portugal Santander Totta
Saudi Arabia Arab National Bank
Turkey Garanti Bank
Nigeria Guaranty Trust Bank
Qatar Qatar National Bank
Sri Lanka Sampath Bank
UAE Union National Bank

Best Sustainable Banks

Australia Westpac
India Bandhan
New Zealand Kiwibank
Switzerland Bank Sarasin
Canada Vancity
Netherlands Triodos Bank
Nigeria Access Bank
US Bank of America

Most Innovative Banks

Africa Wema Bank
Asia Hana Bank
Australasia Macquarie Bank
Europe Monzo
Latin America and the Caribbean CIBC FirstCaribbean
Middle East Gulf Bank
North America CIBC

Macron and Merkel propose eurozone budget

Posted on by Ashton Wenborn

On June 19, German chancellor Angela Merkel and French president Emmanuel Macron agreed, in broad terms, on a budget for the eurozone. Though the declaration is far reaching in scope, the details are still to be determined.

The declaration, made from Chancellor Merkel’s Meseberg retreat in Brandenburg, covers a wide range of topics, including the European economy, defence and migration.

A proposed eurozone budget – parallel to the EU budget – would aim to promote competitiveness and stabilisation in the European Monetary Union, and would be implemented in 2021. It would be planned on a pluriannual basis and derive revenue from national contributions of eurozone states, tax revenue and European resources.

A proposed eurozone budget would aim to promote competitiveness and stabilisation in the European Monetary Union

According to the proposal, funds from the budget could be used to invest in member countries as a substitute for national spending.

Also included are changes to the European Stability Mechanism, put in place in 2012 to deal with the European debt crisis, that would increase its capacity to lend money to struggling economies within the eurozone and contribute to preventing liquidity issues.

To come into effect, all 19 eurozone countries would have to agree to the plan, a difficult task in a divided Europe. To this end, the proposal also addresses perhaps the most politically divisive issue on the bloc: migration. Proposals include increased staffing, an expansion of Frontex, the EU’s migration agency, and improved cooperation with origin and transit countries.

The parallel eurozone budget represents a win for Macron, who has been pushing for such an instrument, but it is likely to be much smaller than he hoped. Though Macron has pushed for allocations to the eurozone budget in the hundreds of billions, it is likely to only be in the tens of billions.

Mohammed bin Rashid inaugurates first project of third phase of Dubai’s solar park

Posted on by Helen

On May 1, 2018, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, inaugurated the 200MW first stage of the 800MW third phase of the Mohammed bin Rashid Al Maktoum Solar Park.

The project is the first in a three-stage phase by Dubai Electricity and Water Authority (DEWA), in collaboration with multiple energy partners. The second stage of this phase will be finished in 2019, with the third stage completed in 2020.

The plant boasts 800,000 self-cleaning solar cells, and will power 60,000 residences

Speaking at the inauguration ceremony, His Excellency Saeed Mohammed Al Tayer, MD and CEO of DEWA, said that this phase of the solar park installation is “a key milestone and shows our strong belief in the role of clean energy in shaping a sustainable future”.

A shifting economy
In recent years, Dubai has taken huge steps towards making the UAE a more sustainable destination. Organisations like DEWA have been greatly responsible for propelling the region towards this goal.

The new solar plant comes complete with an advanced solar tracking system, as well as an array of specialist technologies. It boasts 800,000 self-cleaning solar cells, and the completed project will power 60,000 residences, as well as reduce carbon emissions in the emirate by 270,000 tonnes per year. The Mohammed bin Rashid Al Maktoum Solar Park is the largest single-site solar park in the world and is based on the independent power producer model.

Speaking at the inauguration ceremony, His Excellency Dr Sultan Ahmed Al Jaber, UAE Minister of State and Chairman of Masdar, said: “The UAE’s impressive progress in the field of renewable energy would not have been achieved without the vision of its leadership, [which has strengthened] the energy security of the country by building on the foundation of its hydrocarbon sector to create a diverse mix, including conventional energy, renewables and nuclear energy.”

He also spoke about the work of DEWA, which has played a crucial role in implementing cost-effective renewable energy solutions in Dubai. DEWA is known especially for its attention to cutting-edge technologies, and its ability to use these to further the UAE’s quest towards sustainable growth.

Large-scale projects are not only good for the environment capacity of the UAE; they also stimulate job creation and innovation. The work of DEWA, along with its energy partners, has immeasurably boosted the UAE’s prosperity.

CYBG purchases Virgin Money for £1.7bn

Posted on by Helen

On June 18, it was revealed that Clydesdale and Yorkshire Bank Group (CYBG) has purchased Virgin Money in a £1.7bn ($2.25bn) deal. As a result of the transaction, the joint entity will become the sixth-largest bank in the UK.

The deal is set to save Virgin Money and CYBG a total of £120m ($159m) each year by 2021.

CYBG has agreed to pay Virgin Money a minimum royalty of £12m ($16m) in the first year after the deal is completed, which will then rise to £15m ($20m) per year over four years. It will also pay an added annual royalty from the revenue produced in the fifth year. In addition, Virgin Money customers will be gradually transferred to CYBG over the next three years.

The deal will cause the loss of around 1,500 jobs at both Virgin Money and CYBG, as well as an expected but unconfirmed number of branch closures

According to the BBC, this deal will cause the loss of around 1,500 jobs at both Virgin Money and CYBG, as well as an expected but unconfirmed closure of a number of Virgin and CYBG’s 250 branches across the UK. CYBG hopes to achieve this by “natural attrition”.

Virgin Money shareholders will receive 1.2125 CYBG shares for every share they own. Virgin Group, being Virgin Money’s biggest shareholder with a 34.8 percent stake in the business, will receive a stake of 42.195 percent of CYBG.

CYBG is formed by the two banks: Clydesdale Bank, which was established in 1838 in Glasgow and is now one of Scotland’s largest banks, and Yorkshire Bank, which was established in 1859 in Halifax, West Yorkshire by Colonel Edward Akroyd.

Sir Richard Branson founded Virgin Money in March 1995; he now owns 35 percent of the company and stands to make a large profit from its sale.

This deal has brought together the UK’s two largest challenger banks to form “the first true national competitor” to the ‘big five’ banks, according to CYBG. Jayne-Anne Gadhia, CEO of Virgin Money, has described the transaction as a “compelling deal”.

Green light for AT&T’s purchase of Time Warner

Posted on by Max Tomlin

On June 12, a federal judge approved telecommunications giant AT&T’s takeover of Time Warner in a rebuke to the US Justice Department.  The deal, worth $85bn, has sparked fears of a frenzy of media acquisitions that would make the market less competitive.

The Department of Justice’s attempt to block the merger drew suspicions of political motivations

The case hinged on whether vertical integration can result in the type of anti-competitive practice that horizontal mergers see. Time Warner, a content producer, and AT&T, a content distributor, argued that since they do not compete in the same market, the effects on competition would not be detrimental.

The companies are looking to move forward with the deal quickly, as the break-up date for the merger is on June 21, after which AT&T would have to pay Time Warner $500m as a break-up fee. The deal has been on hold since October, when the government sued in an attempt to stop it.

“The parties have waged an epic battle, under extremely restricted deadlines, to litigate and try this historic vertical merger case,” said US District Court judge Richard Leon in his opinion.

“It has been a herculean task for all the parties and the court. Each side has had its proverbial day in court. The court has now spoken and the defendants have won.”

The Department of Justice’s attempt to block the merger, while not unusual in potential antitrust cases, drew suspicions of political motivations. President Donald Trump has been vocal in his opposition to the merger since its announcement, which some, including Time Warner, have attributed to his deep dislike for Time Warner’s subsidiary, CNN.

The ruling paves the way for other large conglomerates to make bids for firms along their supply chain. Notably, this could be a green light for Comcast to lodge a competing bid, which it has already been considering, against Disney for 21st Century Fox’s entertainment assets.

Mexico’s largest pension fund expands alternatives portfolio

Posted on by World Finance

Afore XXI Banorte is the largest pension fund provider in Mexico – and it plans to maintain its pole position, with a strategy focused on three targets: transforming the customer experience, technological innovation, and redesigning the investment process. In the third of three interviews with XXI Banorte executives, CIO Sergio Mendez Centeno explains how the Afore is redesigning its investment process to align with international best practices, and expanding its alternative investments portfolio. The first two parts of this interview series with CEO Juan Manuel Valle Pereña explore XXI Banorte’s renewed customer experience and the technological innovations the Afore is bringing to market.

World Finance: Sergio, we’ve heard from Juan Manuel about the first two pillars [of your strategy]; how are you redesigning the investment process?

Sergio Mendez Centeno: The way that we’re redesigning the investment process is trying to bring to the local markets the international best practices that we have found in the administration of pension funds.

This means that we are dividing the investment division in three basic silos, which are portfolio management, analysts, and execution and traders.

World Finance: We spoke last time about creating your benchmark portfolio; how has this approach performed?

Sergio Mendez Centeno: The approach has been very, very successful, I would say. It’s something that’s an ongoing process all the time, because you know, regulations are adapting, and the markets are moving, so we have to adapt.

Even though at the end, it’s the light that guides us through the long-term that we are focusing our strategy all the time.

So the benchmark came as a result of our econometric process, in which what we did basically, we tried to approach the most optimal portfolios, given the restriction of the regulation and the investment horizon for our clients.

At the end, it reflects how we approach investments, and how is the way Afore XXI Banorte approaches the balance between returns and risks – which is at the end what creates the best product abroad.

World Finance: You’ve also been expanding your presence in alternative investments.

Sergio Mendez Centeno: That is correct. It’s an option that we need to use, because at the end, part of our fiduciary responsibility is the use of the investment regime fully. And that part of the portfolio – the alternatives portfolio – is something that is an opportunity. Not only about the returns, but about the duration of the portfolio. These kinds of strategies are longer duration than we can have in fixed income and different kinds of assets. And the returns have proven very, very good. So we have been very active.

At the same time the portfolio regulation started to allow us to invest in international alternatives. So that’s something that we have been very very active, trying to find who to partner with in order to approach these new assets. And at the end it’s something that will be reflected in better returns for our affiliates.

World Finance: And how else have you been growing and improving your investment process?

Sergio Mendez Centeno: That’s something that we are constantly improving, let me put it that way.

We are increasing our team on the public side of the portfolio, the equities side. I think it’s quite important to have complete analysis, and to have the full grip of the strategies that we have, deviating from the index of the Mexican bolsa, and trying to approach the best companies and the best returns.

At the same, we are still incrementing and trying to fully utilise our international exposure. And part of that is not only the using of ETFs; it’s also using actively the mandates. The separate managed accounts that we grant to different managers abroad in order to have best of breadth for international markets to our affiliates in the local markets.

And in the end, what we are trying to achieve is the best returns. So for that, and for the best returns, this year we work to obtain the authorisation to trade options, which is quite important. Because again, it’s another tool that we have in order to protect our portfolio against the only constant that we have in the markets: volatility.

World Finance: Sergio, thank you very much.

Sergio Mendez Centeno: Gracias, thank you.

How machine learning helps Afore XXI Banorte anticipate customer needs

Posted on by World Finance

Afore XXI Banorte is the largest pension fund provider in Mexico – and it plans to maintain its pole position, with a strategy focused on three targets: transforming the customer experience, technological innovation, and redesigning the investment process. In the second of three interviews with XXI Banorte executives, CEO Juan Manuel Valle Pereña discusses the technological innovations that the Afore is bringing to market, including deploying machine learning on social media to better understand its customers and anticipate their needs. Part one with Juan Manuel Valle Pereña explores XXI Banorte’s renewed customer experience, while part three with CIO Sergio Mendez Centeno discusses the Afore’s investment process.

Juan Manuel Valle Pereña: Afore XXI Banorte is a very professional team, capable of offering through innovative solutions a service of excellency to all our customers, and make their savings grow towards a better future.

The way we are doing this is by transforming customer experience, technological innovation, and by redesigning our investment process.

World Finance: We’ve talked about customer experience; what technological innovations are you bringing to market?

Juan Manuel Valle Pereña: Part of what we have been doing is to move into a more technology-oriented company, where any of our customers is available to reach us in any possible way.

Although the best possible scenario is to have everyone using the app, because it’s easier to contact them, and if we can contact them, we can provide them with information that they need. Or that they don’t know that they need, but we do know! By using machine learning in social media, we might be able to know what people of different profiles, of different ages, are looking after, and we can provide that information.

So, technology is a key element for us, and we have been working for more than a year in providing these kinds of solutions to our customers.

World Finance: How are you transforming your internal processes in order to enable this kind of digitisation?

Juan Manuel Valle Pereña: By moving everything into a customer centred organisation, what we are doing is concentrating first in those processes that are related to the customers, and once we are concentrated in those, taking away anything that is not required.

Just an example: we realised that a lot of people go in to our offices because they needed to start one of the processes. They usually came back two or three times, not only one. So one of the things we are doing is that, once you go, you download the app, and you can follow on that process from your house. You don’t need to go back; if you need to send some more information, you are able to do it through the app. So those kind of things will make everything easier for the customer, and once we have the simplest approach to any process, we will move that to our platforms.

World Finance: What feedback have you had from these improvements?

Juan Manuel Valle Pereña: It’s not so long that we started. But what we have seen, even in a few months: it’s a positive feedback. People going to our offices, people calling our call centre, people using the app; they are approached for a follow-on with the net promoter score, and we have seen a gradual improvement. And we expect that by the end of the year, the numbers are quite different from what we saw in the first month that we were doing this.

World Finance: And what’s next for XXI Banorte’s digital transformation?

Juan Manuel Valle Pereña: Well I think technology is a never-ending story. So we will continue improving the experience, introducing whatever new elements we believe will be helpful. Even in things we introduce that have been successful, we need to be adjusting things so that until we find the perfect way to address every single issue, every single topic, with our customers.

World Finance: Juan Manuel, thank you very much.

Juan Manuel Valle Pereña: Paul, thank you very much also.

Afore XXI Banorte centres customer experience with behavioural science

Posted on by World Finance

Afore XXI Banorte is the largest pension fund provider in Mexico – and it plans to maintain its pole position, with a strategy focused on three targets: transforming the customer experience, technological innovation, and redesigning the investment process. In the first of three interviews with XXI Banorte executives, CEO Juan Manuel Valle Pereña explains his vision for a renewed customer experience, using machine learning to anticipate customers’ needs, and how behavioural science is helping the Afore better incentivise voluntary savings. Part two with Juan Manuel Valle Pereña dives deeper into XXI Banorte’s technological innovations, while part three with CIO Sergio Mendez Centeno discusses the Afore’s investment process.

World Finance: Juan Manuel, let’s start with your vision, your ideal customer experience.

Juan Manuel Valle Pereña: A little bit more than one year ago, when I arrived at Afore XXI Banorte, we realised that we were losing customers. And it’s not something that you usually do: you wake up in the morning and you want to change who is administering your resources for retirement! And we realised that we needed to make some changes.

So, customer experience now is our priority, and we have been working hard in achieving that priority through different means. Technology, the kind of information we provide, the kind of information we get from them. We need to understand them better: what they are thinking, what they need, how they behave, what they expect. And after doing all that, delivering exactly what they need.

World Finance: So tell me more about how exactly you are engaging your customers. How are you listening to them, understanding their needs, and how to communicate back to them?

Juan Manuel Valle Pereña: We use machine learning tools and data sciences with information that we can find in social media, information from the chats that we have with our customers, information that we get from the call centre. Using all that data we can better address their interests and their needs. So we’re able through bots to answer any question very fast.

We have been moving towards a multi- or omni-channel platform, where in every single way they can contact us, they could expect a service of excellency; either in our office, our call centre, we developed an app. And with the app they have all the information they need.

World Finance: What effect have your efforts had so far, and what’s next?

Juan Manuel Valle Pereña: The results have been positive. We have heard good feedback.

We also introduced a different way of being evaluated by our customers, the net promoter score. And in every single channel that we have, we have seen an improvement.

We have very ambitious goals for the end of the year in the net promoter score, and also in the proportion of customers that do voluntary savings.

World Finance: You explained last time we spoke about the importance of encouraging voluntary savings; how are you achieving this?

Juan Manuel Valle Pereña: We have been working with an international organisation, ideas42, and they apply behavioural sciences to everyday conducts. And they help us to identify the kind of things that we should be doing, the kind of incentives we should be using, the kind of information we should be providing to our customers.

With that information, with those tools, having a very good product – there is no better product for savings in Mexico than pension funds – we’re framing the structure so that we have the right incentives, the information that might be required, for a successful implementation.

So we have been working hard; we already have some of the tools in place. And the launch of the campaign for voluntary savings will be in July.